![(Question 2) Complete the following table (i=(5+n)%, i = 7%, f=(10+2n)%] Cash flows in actual Multiplied by deflation factor](http://img.homeworklib.com/questions/82704720-7991-11ea-b273-337d97fd65c9.png?x-oss-process=image/resize,w_560)
Homework Answers
Given,
- i = (5+n)%
- i' = 7%
- f( inflation rate)= (10+2n)%
| n | cash flows in Actual Dollar (A) in $ |
Multiplied by deflation factor i.e (1+ (10+2n)%)-n |
Cash flow in constant dollar ( A')in $ |
| 0 | -75000 | (1.1)-0 | -75000 |
| 1 | 32000+1000×1=33000 | (1.12)-1 | 29464 |
| 2 | 35700+2500×2=40700 | (1.14)-2 | 35702 |
To calculate deflation factor we use this formula = (1+ f%)-n
Further to calculate cashflow in constant dollars we use the below formula-
A'=A × (1+ f%)-n
Add Answer to:
n= 17
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